This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Watch Out for Tax Preparer Fraud, IRS Warns

NEW YORK (TheStreet) -- The Internal Revenue Service considers tax preparation fraud a serious threat to taxpayers -- it made No. 3 on the agency's list of "Dirty Dozen" tax scams last year.

The IRS says 60% of American taxpayers will rely on a tax professional to handle their taxes, and while it notes "most return preparers provide honest service to their clients," there are some tax preparation services that don't pass the IRS' smell test.

"Some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft," says the IRS in its listing.

The agency also warns taxpayers who use professional preparation services: They are legally responsible for their tax return, even if someone else handles the details. And they must watch out when a tax preparer guarantees a tax refund in exchange for a fee. Months later the IRS comes knocking with audit papers in hand and the "tax specialist" is nowhere to be found.

"Refunds are never a guarantee," notes Mary Beth LaMunyon-Jones, chairwoman of the California Tax Education Council. "Tax law is what it is. There is no magic formula to get around it. Either you owe or you don't."

Some states, including California, have raised the bar for tax preparation specialists, mandating that anyone who prepares taxes for a fee be an attorney, a certified public accountant or a council-registered tax preparer. In the Golden State, anyone caught breaking tax preparation laws can be fined up to $5,000.

To do your part in walling off tax preparation fraud, the council advises avoiding tax preparation firms and individuals who:

  • Cannot be verified as either an attorney, CPA, CRTP or EA.
  • Advertise "guaranteed" refunds.
  • Claim they don't have to sign your tax return.
  • Do not have a Preparer Tax Identification Number from the IRS.
  • Base their fee on a percentage of your refund.

If you are the victim of tax preparation fraud, the IRS encourages you to report the incident immediately. Start at the agency's tax fraud reporting website.

The IRS also offers a useful tutorial on how to hire a reputable tax specialist. Find it here.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,172.68 -107.06 -0.62%
S&P 500 1,994.29 -16.11 -0.80%
NASDAQ 4,527.6890 -52.10 -1.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs